Gold vs. Bitcoin: Which Is Better? (2024)

Regulation

Gold's established system for trading, weighing, and tracking is pristine. It's very hard to steal or fake; it's also highly regulated. In many countries, you cannot cross borders while carrying gold without regulatory permission. When investing in gold, you'll generally only be able to purchase it from registered dealers and brokers; one caveat is that you should only buy physical gold if you can safely store it.

Bitcoin is also difficult to steal and fake, thanks to its encrypted and decentralized system. It is generally legal to use across the borders of different countries, with a few exceptions. However, the regulatory infrastructure that could exist to ensure that users are safe is not yet in place in many countries—the pseudonymous nature of cryptocurrency also makes it challenging to regulate.

Utility

Gold has historically been used in many applications—currency, luxury items, specialized applications in dentistry, electronics, and much more. This cross-functional utility has given gold its ability to maintain value when other asset values fall.

Bitcoin is limited in its utility. It is currently only used as a digital currency and a speculative investment. However, there is an emerging financial technology whose concept is to use cryptocurrency for financial transactions called decentralized finance. Bitcoin has utility in this emerging tech as a form of lending, borrowing, and possibly more. It also has the potential to be involved in nearly as many applications as gold—but following the same line of thought, it has just as much potential to become useless and invaluable.

Liquidity

One primary concern for investors looking toward Bitcoin as a haven is its liquidity. The top few cryptocurrencies by market cap are generally very liquid assets because they have higher trading volumes and more capital invested in them; less popular cryptocurrencies are much less liquid. But there are limits to its liquidity depending on the platform you use.

For example, if you had several hundred Bitcoins on Coinbase, you might have a hard time liquidating them if you wanted to get out of cryptocurrency in a hurry—exchanges such as Coinbase only allow for $100,000 liquidation of cryptocurrency per day. If Bitcoin's price is higher than the daily limit allowed by your exchange, you'll only be able to do it in smaller increments. If you don't own many Bitcoins, it might be a much more liquid asset for you. Additionally, if the market swings wildly and many investors begin selling their Bitcoin, its price will drop dramatically in response.

Volatility

Bitcoin has historically proven to be subject to the media effect, investor sentiment, regulatory actions, and hype. News from the digital currency sphere could prompt investors to panic and make quick decisions, quickly sending Bitcoin's price upward or downward. This volatility is not inherent to gold for the reasons mentioned above, making it perhaps a safer asset.

In recent years, several alternative cryptocurrencies have been launched which aim to provide more stability than Bitcoin. These coins are called "stablecoins" because their prices are pegged to fiat currency or another stable asset. For instance, Tether is linked to the value of the U.S. dollar through reserves.

The Bottom Line

Whether Bitcoin is a better investment than gold depends on your investment goals, enjoyment of speculating, risk tolerance, and how much capital you can stand to lose if the market turns. Each asset has benefits and drawbacks. A financial advisor can help you create investing goals and decide whether Bitcoin or gold is better for you.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimerfor more info. As of the date this article was written, the author owns BTC and XRP.